Global economy will ‘crumble’ if Fed doesn’t stop hiking interest rates, billionaire investor Sternlicht says

“They will wreak incredible havoc if they continue their action, and not just here, around the world,”

— Barry Sternlicht, CEO, Starwood Capital Group

Billionaire Barry Sternlicht, the chief executive officer and chairman of real estate investor Starwood Capital Group, has jumped on the bandwagon of people urging the Federal Reserve to ease its aggressive rate hikes before anything breaks.

On Tuesday, in an interview with CNBC’s Squawk Box, Sternlicht said the Fed should pause to assess how its rate hikes are affecting the economy and that Federal Reserve Chair Jerome Powell has done “enough” already has to curb inflation.

The billionaire private equity and real estate investor said the Fed may be misunderstanding the factors underlying the global wave of inflation that has accelerated consumer price growth to the highest level in more than 40 years.

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While others have focused on rising prices for crude oil and other commodities, Sternlicht blamed the massive fiscal stimulus packages approved by Congress and Presidents Donald Trump and Joe Biden.

“Now that we’re gaining momentum and people are finding jobs and wages are going up, they want to stomp on the whole thing and end the party,” he said.

Sternlicht also warned the Fed against pausing and assessing how rate hikes are affecting the real economy. Typically, higher interest rates take longer to feed through to the underlying economy, while the impact on stock and bond markets is felt almost immediately, he said.

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“You will see the economy flip. They will have to lower interest rates because the economy will collapse. Who would run such a business?”

Sternlicht is hardly the first CNBC guest to complain about aggressive monetary tightening this year. The Fed has already made three 75 basis point rate hikes this year, and Fed fund futures markets are pricing in over a 60% chance of a fourth following the November central bank meeting.

Late last month, Wharton Professor Jeremy Siegel accused the Fed of making one of the biggest policy mistakes in its 110-year history by waiting too long to fight inflation.

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And now, Siegel said, the Fed aims to make working people pay for their miscalculation.

See: Wharton’s Jeremy Siegel has accused the Fed of making one of the biggest policy mistakes in its 110-year history

Hopes that the Fed may be heading for a “tipping point” toward less aggressive rate hikes have helped US stocks rise with the Dow Jones Industrial Average DJIA since early October.
on track for biggest consecutive gains in more than two and a half years.

The S&P 500 SPX,
up 2.8% to 3,780 on Tuesday, the Dow DJIA,
up 2.5% to 30,240 and the Nasdaq Composite COMP,
rose 3% to 11,139.

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